The rate cut was approved on a 9–3 vote, highlighting unusually sharp disagreement within the Fed over the path of policy. Two regional Fed presidents preferred no cut at all, while one governor argued for a larger 50 bp reduction. That split matters because it shows the Fed is not aligned on what comes next — some officials already think rates are low enough, while others worry the economy may need more support.
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Immediately after the decision, Treasury yields fell sharply because investors focused on the cut itself and assumed policy would keep moving easier. When markets expect lower rates ahead, bond prices rise and yields fall — a standard relief reaction.
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But the next day, yields moved higher as investors reassessed the vote and the Fed’s guidance. The split made it clear that future cuts are uncertain and contested, not automatic. Combined with Powell’s emphasis on waiting, tariffs still feeding inflation, and the restart of Treasury bill purchases, bond investors grew less confident that inflation risks are fully behind us.
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In simple terms, yields rose because the bond market stopped pricing in a smooth easing path and started pricing in policy uncertainty — the defining feature of what is described as a hawkish cut.
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Why that matters for stocks: higher yields raise the cost of borrowing for companies and households, which directly pressures businesses that rely on cheap financing or future growth assumptions. Stocks most exposed tend to fall into three groups:
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• Rate-sensitive financials and lenders — regional banks and consumer-credit firms see funding costs rise faster than loan growth, compressing margins.
• Unprofitable or high-multiple tech — many AI, software, and speculative growth names are valued on profits far in the future; higher yields reduce the present value of those earnings, pushing valuations lower.
• Highly leveraged companies — firms funding expansion with debt face higher interest expense just as growth expectations become less certain.
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That’s why the post-cut rise in yields mattered: even with rate relief, financial conditions are not easing cleanly, and the stocks that rallied hardest on hopes of an easy Fed path remain the most vulnerable if yields keep pushing higher.
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In addition to yields moving higher, signs of that pressure are now emerging in AI infrastructure itself.